This invention relates generally to the field of investment advice systems and more specifically to investment advice systems and methods that allow a user to receive advice over a network, e.g., the Internet.
In the past few years, the retail brokerage and financial analyst industries have developed a number of electronic systems accessible over the Internet to provide users, e.g., investors with investment advice. The term “user” as used herein encompasses both an individual investor and that investor's representative(s) such as a financial planner. Some of the recently developed electronic systems perform mathematical calculations to provide advice regarding a variety of investment decisions, such as mortgage refinancing, loan amortization, and retirement planning.
However, these financial advice systems typically are limited in several ways. To the extent that these electronic services provide advice regarding specific securities, the advice often does not take into account information about the user's portfolio and the form of the advice tends to replicate old-fashioned, broker-centric, research reports distributed through conventional postal mail distribution systems.
These electronic security research reports provide information on a particular company specified by a user. The reports rarely suggest alternatives or offer different opinions. Further, the electronic systems deliver the reports in prose, which requires time to read and comprehend. In other words, current electronic security research reports have drawbacks in the information they supply and in their method of delivery of information.
The electronic systems typically do not customize the information they provide in that the provided information does not take into consideration a user's existing portfolio or how a user's portfolio compares to various market measures in terms of risk and reward. These electronic systems do not inform a user how a proposed transaction will impact the user's portfolio in terms of metrics that characterize the user's portfolio. Furthermore, such information is not provided when the user is deciding whether to go forward with a transaction, nor is it delivered in an immediately comprehensible form. Instead, the user must read the report(s), remember the information and, in one manner or another, contact his or her broker to go forward with the transaction. Further, many of these systems are not accessible by many users.
In other words, there are at least the following three drawbacks to existing financial advice systems: 1) only a fraction of investors are receiving investment advice; 2) those currently receiving investment advice receive advice that is incomplete, inconsistent and/or not timely; and 3) mutual funds and broker/planners are often not integrated into the advice system so as to increase productivity and distribution of advice. With respect to the first point, financial institutions currently provide advice almost exclusively to high net worth households, e.g., households with assets of over five million U.S. dollars. However, households with assets of between one hundred thousand and five million U.S. dollars have recently become more active in investing and in managing their wealth.
With respect to the second point, i.e., not receiving complete, consistent and timely advice, mutual finds charge a management fee and are managed without regard to tax consequences. Brokers or financial planners often know only a portion of products available and sometimes give inconsistent advice. Further, online financial services and products tend to be security specific and do not take into account the user's portfolio or tax position as noted above.
With respect to the third point, Forrester Research in “Overhauling Financial Advice” February 2000, incorporated herein by reference in its entirety, estimates that approximately twenty million households will use automated online advice solution by 2005. Thus, mutual funds and brokers/planners require productivity tools to facilitate handling larger client bases and to provide better services and new services.
Thus, the financial services community needs a system that allows a user to interactively explore the impact that one or more proposed transactions would have on the user's financial account. The system should provide advice to the user based at least in part on the user's specification as to his preferred risk/reward balance. The system should provide the user with the ability to obtain a variety of information including: 1) the impact that the transactions would have on the risk/reward balance of the user's portfolio; 2) the impact on the quality of stocks held in the user's portfolio as determined by advisors, either separately or combined; 3) the forecast for the stocks involved in the proposed transaction as determined by advisors, either separately or combined; 4) and/or the tax implications of the proposed transaction(s).
Expanding on the last point, a need exists for a system that provides advice on a proposed transaction based at least in part on the tax consequences of that transaction. For example, a system is needed that advises against realizing gains by selling a position in a security that would soon qualify for long-term capital gains status.
Thus, a need remains for an investment advice system that provides clear, easy-to-comprehend advice, customized to the user as to that user's portfolio holdings, tax position and risk profile at the time the user is reviewing his/her portfolio and/or considering making a transaction. In other words, a need exists for an investment advice system that provides effective advice at the point of sale, i.e., when the user is capable of making a financial transaction.
Further, a need exists for an investment advice system that allows a user access to more than one opinion on a particular potential security transaction. A need exists for a system that allows a user to select advisors from a group of advisors. In addition, a need exists for an investment advice system that allows a user to obtain a consensus, i.e., the pooled or combined opinions of more than one advisor, on a proposed transaction or on the condition of the user's portfolio.